Just before the weekend began last Friday, rumors about OnLive began to leak out over Twitter. The convoluted story gleaned from OnLive employees was that the company was entering bankruptcy and that its entire staff had been laid off. The only thing OnLive would say about the turmoil inside the company was that the OnLive service would be continuing.
It turns out that the real explanation for Friday’s events is more complicated than anyone imagined.
Today OnLive finally issued a statement on the matter, saying the company has transferred its assets to a newly formed company that is also named OnLive. The company’s game and desktop services will continue to operate as normal, and customers will retain all of their purchases. Venture capital firm Lauder Partners has invested heavily in the new OnLive. The company seems completely undeterred by its over-the-weekend restructuring. In fact, the company stated it has several product and service announcements coming in the next few weeks.
What happened is that OnLive’s board of directors filed for Assignment for the Benefit of Creditors (ABC), something close to bankruptcy, but where debt collectors are left in the dust. OnLive transferred its assets to a third-party holding company, which then transferred those assets to the new OnLive. This process left the original OnLive’s investors, including, no doubt, many OnLive employees, with worthless stock.
The conflicting rumors flying around on Friday afternoon turned out to all be true, in a way. Though the original OnLive is shutting down and did lay off its entire staff, the new OnLive re-hired around half of those employees at their current salaries. The other half were offered “consulting” work in exchange for stock options with the new OnLive. OnLive stated that it plans to hire more staff when it secures additional funding. According to an official statement, “most” OnLive executives are receiving reduced compensation to allow more employees to be hired, and CEO Steve Perlman did not receive any compensation for the transaction.